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2019 (2) TMI 1321 - AT - Income TaxDisallowance of interest paid on loans - interest bearing funds has been diverted to give various loans and advances for non business purposes - HELD THAT:- The assessee has claimed to have borrowed loans for specific purpose of acquisition of property. According to the assessee, amount from Citibank has been partially used for business purpose and partially used for acquisition of property. Similarly loan taken from LIC and HDFC are for the purpose of acquisition of property. Likewise, interest paid on unsecured loan is fully funded for the purposes of business. There are divergent facts emerging from the orders of the lower authorities and the arguments of the assessee in light of certain evidences. It is the case of the AO that the assessee has diverted interest bearing funds for non business purposes, but the assessee claims that the loan taken from Citibank has been partially funded for business purpose and partially funded for acquisition of property. Notice that the assessee has taken a proposition in the light of the decision in the case of CIT vs Reliance Utilities & Power Ltd [2009 (1) TMI 4 - BOMBAY HIGH COURT] wherein held that when mixed funds are available, a general presumption goes in favour of the assessee that loans and advances are out of interest free funds and no part of interest bearing funds has been used. Consequently, no interest expense has been disallowed. In this case, the assessee has filed enough evidence to prove that loan has been partially borrowed for the purpose of business. The issue needs to be re-examined by the AO in the light of claim of the assessee that the Citibank loan has been partially funded for business purpose. - Appeal filed by the assessee is allowed for statistical purpose.
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